Dow Chemical , DuPont Could Merge, Massive Layoffs Could Follow

DETROIT – Two of the largest chemical companies could merge this week in one of the biggest deals in the chemical industry. Bloomberg Business reported this morning that DuPont Co. and Dow Chemical Co. are in late stage merger discussions.

If the two businesses do merge, they will quickly be forced to break up into smaller entities due to regulatory concerns, Bloomberg reported. The three new entities would likely be broken down as agricultural chemicals, specialty products, and materials such as plastics, the New York Times said. Hassan Ahmed, an analyst at Alembic Global Advisers, told Bloomberg that cost savings of breaking up the company into three entities could save between $3 and $4 billion.

DuPont has talked with other companies about divesting its agriculture business, including to Dow, Reuters reported. Likewise, Dow has been reviewing options for its seed business, according to news reports.

A merger, if it were to go through, would create the second-largest chemical company in the world behind Germany-based BASF SE. The merger would propel the new entity to the forefront of the seed and pesticide industry, passing industry giant Monsanto Co. Both Dow and DuPont have a market value of approximately $60 billion, the Wall Street Journal reported. Company officials have declined to talk to any media outlet about the possible merger.

Midland, Mich.-based Dow Chemical’s stock shot up in overnight trading, while DuPont’s stock was up more than 12 percent in after-market trading on news of the merger talks.

A merger could also cause massive layoffs as companies reduced redundancies, analysts told the Wall Street Journal. Earlier this month, DuPont’s spinoff company Chemours announced a global workforce reduction of approximately 400 positions, approximately 5 percent of its total employee and contractor base. This action is part of ongoing efforts to streamline and simplify the structure of the organization worldwide and to reduce costs, the company said. In May, Dow announced it was cutting 3 percent of its global workforce, between 1,500 and 1,750 positions, in response to an activist investor.

In June, Dow’s chairman and chief executive officer Andrew Liveris was under investigation by the U.S. Securities and Exchange Commission over allegations he misused company funds for personal benefit. The SEC investigation comes on the heels of accusations made against Liveris in recent lawsuits and complaints by former employees.

Bloomberg reported that Liveris would likely be chairman of the merged Dow and DuPont, while DuPont’s CEO Ed Breen, who took over the company last month, is expected to be chief executive of the new company.